Toy makers shifting production

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: January 16, 2013 9:55 pm ET
Updated: January 17, 2013 9:40 am ET

Visitors peruse the Thailand pavilion during the Hong Kong Toys and Games Fair. (Plastics News photo by Steve Toloken)

Related to this story

Topics Consumer Products

HONG KONG -- China's vicelike grip on global toy manufacturing is showing signs of loosening, with rising wages and falling exports prompting some Chinese plastic toy makers to shift production to other countries.

Large Hong Kong toy maker and injection molder Lung Cheong International Holdings Ltd., for example, sold its mainland China factory campus and established new facilities in Indonesia. The company claims Indonesia "enjoys favorable advantages over [China] and most Asian countries due to plentiful supply of labor."

Speaking in early January interviews at the Hong Kong Toys and Games Fair, the world's second-largest toy show, executives said that while China retains supply chain advantages, interest is growing in alternative manufacturing spots.

"For the U.S., Mexico is booming. I lost one or two projects to Mexico for sure," said Bernie Ting, chairman of the Hong Kong Toys Council and general manager of plastic toy molder Qualidux Industrial Co. Ltd. "Toy making is spreading out. ... The trend is kind of moving [from China]."

A key reason is that wages in the toy-making hub of Guangdong province have doubled in the last five years, he said.

Neil Friedman, the former president of retailer Toys R Us and toy maker Mattel Brands, said global toy companies are looking at manufacturing locations outside China.

"They definitely are, there's no question about it," said Friedman, a 40-year veteran of the toy industry, in an interview after an appearance on a panel at the Hong Kong show. "You've seen people moving manufacturing to Vietnam. I think people are exploring because the labor costs are getting higher and higher [in China]."

Clearly, 2012 was a tough year for Hong Kong's toy makers, which do most of their manufacturing in China. Hong Kong is the world's second-largest exporter of toys, after mainland Chinese factories.

Toy exports from Hong Kong dropped 10.8 percent through the first 10 months of 2012, compared with the same period in 2011, to US$7.5 billion, according to figures from the Hong Kong Trade Development Council released at the fair. That figure includes toys made in Hong Kong-owned factories in mainland China and re-exported through the ports of Hong Kong.

And while executives at the fair said the Christmas season was better than expected, it was not enough to turn the situation around. "By October we knew it would be a slow year," Ting said.

Toy sales in the U.S. dropped about 2 percent for the year, and economic problems in Europe became, for some companies, the Grinch who stole their Christmas.

"The global economy is still affected by the uncertainties related to the European sovereign debt crisis [and] together with rising operating costs, these factors pose potential challenges to the entire toy industry," said Kader Holdings Co. In its most recent Hong Kong Stock Exchange earnings filing, the firm reported that its toy sales dropped more than 25 percent in the first half of 2012.

"Amid the difficult operating environment, a growing number of small-scale toy manufacturers were forced to leave the market," according to Kader. On its website, Kader said it has more than 500 injection molding machines and 10,000 employees in several Chinese factories.

Hong Kong trade statistics show that exports to Germany and the United Kingdom dropped sizably, down more than 40 percent to each country. While country-specific export figures can sometimes vary from year to year, drops of that size could indicate companies shifting some sourcing away from Hong Kong firms, Ting said.

Lung Cheong said that although there's also wage pressure at its Indonesia plant, the more positive environment there "seems sustainable."

"The group looks forward to optimistic growth in our Indonesian plant," the company said. "Management remains confident of the group's ability to seize this unique opportunity to consolidate its market position amid the exit of weaker players."

Still, for some Chinese toy factories 2012 was a good year.

Bright spots

Business was up for Shanghai KingBaby Children Products Co. Ltd., an injection molder of riding toys for children. According to sales director Mike Hu, that's because the company has focused in recent years on improving its product design and not competing on price.

The Shanghai-based company, with 80 molding machines in factories there and in Anhui province, has added several-hundred employees in recent years, bringing its total workforce to 1,000, he said.

Hong Kong-based Kin Yat Holdings Ltd. said toy sales were up and it expects more business from another toy customer to come to fruition. It also said it has been able to make productivity gains to keep up with rising wages in China.

The company is investing in a new factory in Shenzhen, China, because of the increased business in toys and a line of robotic vacuum cleaners it manufactures.

One analyst predicted that while the toy industry is very labor intensive and follows lower wages, it's not likely to abandon China in great numbers.

"Having spoken with quite a number of factories, you will probably see a slight increase of factories considering to go outside China," said Christian Ewert, president and CEO of ICTI Care Foundation. The socially responsible sourcing initiative is part of the New York-based International Council of Toy Industries.

"But the trend more observed," Ewert noted, "is you see factories moving from the south to the north [within China], in order to capitalize on being closer to human resources in those places."

The Hong Kong Toy Fair was held from Jan. 7-10, with about 1,900 exhibiting companies and more than 30,000 expected attendees.


Comments

Toy makers shifting production

By Steve Toloken
Staff Reporter / Asia Bureau Chief

Published: January 16, 2013 9:55 pm ET
Updated: January 17, 2013 9:40 am ET

Post Your Comments


Back to story


More stories

Image

BASF targets coffee and automotive connoisseurs with new resin grades

October 21, 2014 2:07 pm ET

BASF SE is using polybutylene terephthalate (PBT), which is normally used to manufacture high-end electronics, in a food consumer packaging product.    More

Image

Plastic particles showing up in Germany's Lake Constance

October 21, 2014 1:16 pm ET

While Fakuma 2014 exhibitors and visitors occupied themselves with topics like molding of micro-sized plastic parts during the show, the presence of...    More

Image

Material Insights: Fakuma puts the spotlight on medical and automotive-related materials news

October 20, 2014 10:13 am ET

Editor Don Loepp and senior reporter Frank Esposito break down all the materials-related news from the Fakuma trade fair in Friedrichshafen, Germany.    More

Image

Momentive gearing up for some timely LSR sales

October 17, 2014 10:58 am ET

Momentive Performance Materials Inc. has plenty of time for customers at Fakuma — thanks to colorful new watchbands made with the firm's fiber-...    More

Image

Plastics News Now: Humanoid robot shows off skills at Fakuma

October 16, 2014 7:07 am ET

A workerbot, with a smile on its face, was a big attraction at Fakuma this week, plus a mostly composite helicopter takes flight and SPI is looking fo...    More

Market Reports

Plastics Recycling Trends in North America

This report is a review and analysis of the North American Plastics Recycling Industry, including key trends and statistics based on 2013 performance. We examine market environment factors, regulatory issues, industry challenges, key drivers and emerging trends in post-consumer and post-industrial recycling.

Learn more

Plastics in Mexico - State of the Industry Report

This report analyzes the $20 million dollar plastics industry in Mexico including sales of machinery & equipment, resins and finished products.

Our analysts provide insight on business trends, foreign investment, top end markets and plastics processing activity. The report also provides important data on exports, production, employment and value of plastics products manufactured.

Learn more

Plastics Caps & Closures Market Report

The annual recap of top trends and future outlook for the plastics caps & closures market features interviews with industry thought leaders and Bill Wood’s economic forecast of trends in growing end markets. You will also gain insight on trends in caps design, materials, machinery, molds & tooling and reviews of mergers & acquisitions.

Learn more

Upcoming Plastics News Events

January 14, 2015 - January 14, 2015Plastics in Automotive

February 4, 2015 - February 6, 2015Plastics News Executive Forum 2015

June 2, 2015 - June 3, 2015Plastics Financial Summit - Chicago 2015

September 16, 2015 - September 18, 2015Plastics Caps & Closures - September 2015

More Events